Parents as Trustee

Parents are good choices from an economic perspective, in that they usually don't charge a fee, unlike a professional trustee. If the plaintiff is a minor, his parents will know his needs better than anyone else and will be able to plan for his future needs.

But whether particular parents are the best choice depends on a number of factors. While they are very familiar with the daily needs of the beneficiary, they may not be able to view the entire picture objectively.  They frequently suffer conflicts of interest given that the decisions they must make as trustee could potentially have a large effect on the household and the parent/trustee's decision may be influenced by that knowledge.  The parent also may not have the necessary investment experience needed to manage the trust.

Other family members as Trustee

Non-parent family members may be appropriate to serve as trustees.  They may be better able to manage the business, tax and administrative concerns of the trust. Additionally, the likelihood of self dealing may be reduced. Family members are also economically advantageous, since they will likely charge less than a professional trustee. The reduced costs and security offered by a non-parent family member make then an attractive choice as trustee.

Family or friends as Trustee

A professional individual, a trusted advisor or a close friend may serve as trustee.  A close friend may be willing to serve as trustee for lower fees. Additionally, a close friend may be more accessible in emergency situations and more willing to take on the social worker aspects associated with the trust than would a professional trustee. However, before agreeing to a family friend, the attorney should do her best to make sure that the friend has sufficient experience and is sufficiently reliable to fill this important role.

Banks and trust companies as Trustee

Historically, banks and trust companies were the most common choice for trustee. With a solid backing of experience, the family could reasonably expect that a given bank or trust company's investment policies would reflect the same balance of considerations in ten years as at present.  Additionally, bank and trust companies offered continuity for the family.

The major drawbacks surrounding bank and trust companies as trustees are cost and inflexibility.  In addition, they may be unequipped to take on the quasi-social work role often required in special needs cases.  Often banks also are unfamiliar with the rules of public benefits programs and forego available benefits, to the detriment of the trust.

Finally, the recent merger of banks has meant for many trust beneficiaries that instead of dealing with their local banker who they know and trust, they must work with an unknown trust officer who they may only know over the telephone.

Attorneys as Trustee

In recent years, an increasing number of attorneys have begun serving as trustees.  Special Needs Trusts are particularly conducive to attorney trustees. The eligibility, investment and special needs considerations have legal issues and the lawyer will likely be involved in the administration of the trust, regardless of whether he or she serves as a trustee.

There are, however, difficulties associated with choosing an attorney to serve as trustee. The attorney is not as close as family members or friends and is likely to be an expensive alternative.   Additionally, the attorney may not have the necessary investment and accounting background or resources on staff. Finally, individual lawyers are not as permanent as a bank or other institutional trustee.

Other institutional/corporate trustees

Recently, professional fiduciary organizations are popping up throughout the country. They may either be social service agencies, offshoots from public agencies who have trained their employees to act as fiduciary, or geriatric case managers who have trained their employee to act as trustee. Such organizations may be particularly suited to administer a special needs trust.  They should, however, be viewed cautiously since little regulation exists for private fiduciary business.

In short, there's no perfect choice. When choosing a trustee, the factors to be considered include the cost of the available parties, relative investment experience, and flexibility and bureaucracy. Additionally, the trustee's knowledge of public benefits programs and their regulations, as well as the beneficiary's special needs and circumstances, should be considered.  Often it can make sense to split the necessary trustee roles, with a bank or trust company handling investments and accounting, a family member or social worker taking care of planning for the beneficiary and disbursements, and an elder law attorney advising on public benefits issues.  This can be done through multiple trustees, or a single trustee advised by individuals with the necessary knowledge and experience.

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